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Treasury officials say that is why the
cost of housing benefit has been able to double over the last decade and
the budget for incapacity payments also spiralled out of control under
the last Labour government.

BANK LEVY TO RISE FOR SIXTH TIME

High street lenders face a hike of almost 10 per cent to the bank levy after the Treasury admitted it will not raise nearly as much cash as originally hoped.

The tax on bank balance sheets, introduced two years ago, is expected to generate £1.6billion in the current financial year.

This falls £600million short of the £2.2billion predicted by the independent Office for Budget Responsibility in last year’s Budget and misses the revised £1.8billion target set by the Chancellor in his autumn statement in December.

The Government said the hike – the sixth since the tax came in – will ensure lenders do not benefit from an upcoming cut in corporation tax.

But critics warned it could put banks off lending.

Under plans to be fleshed out later this year, ministers will be forced to examine how this spending might rise over a period of five, ten or even 20 years.

Ministers would then be given incentives to manage spending and tackle problems before they arise, rather than watch budgets soar.

AME spending accounts for around half of all government spending. It would not include the National Health Service.

Mr Osborne said: ‘Ultimately as a country we will not be able to spend more on the services we all value, from our NHS to our Armed Forces, or invest in our infrastructure, unless we go on tackling the growth of spending of welfare budgets.’

The Chancellor said that ‘in practice it was annually unmanaged expenditure’ and said the curbs he plans ‘will bring real control to areas of public spending that had been out of control’.

He added: ‘All decisions, on welfare, pay and departments are tough and they affect many people. But if we didn’t take them then what is a difficult situation for them and for the whole country would be very much worse.’

The Chancellor stressed that the plans would not lead to immediate cuts in welfare in the spending review due to take place this summer to draw up spending limits for 2015/16.

But the move appears to be a ploy by Mr Osborne to bind future governments to control welfare payments – potentially tying the hands of a future Labour government.

TAX AVOIDERS WILL BE TACKLED: FIRMS COULD BE NAMED AND SHAMED

Accountancy firms could be named and shamed for helping tax avoiders, under plans unveiled by George Osborne.

The Chancellor confirmed that a new ‘general anti-abuse rule’ would be brought in, making it far easier to force people to pay their fair share of taxes.

And he has targeted those who deposit their money in tax havens by coming to information-sharing agreements with the Isle of Man and the Channel Islands.

Talks are also under way with overseas territories, such as Bermuda, the Cayman Islands, the British Virgin Islands and the Turks and Caicos Islands, to ensure that people cannot avoid UK taxes there.

Mr Osborne told MPs that he was unveiling ‘one of the largest-ever packages of tax avoidance and evasion measures presented at a Budget’.

Tory sources made clear the intention is not to squeeze pension payments, where the government has made a triple lock pledge to keep the state pension rising.

Mr Osborne said the changes he is planning would not affect ‘automatic stabilisers’ that already operate with regard to benefits.

That means ministers would not cut the level of a benefit like Jobseeker’s Allowance just because unemployment rose for a while, since that is seen as an ‘automatic stabiliser’ during an economic downturn.

But a benefit that was increasing outside of the economic cycle, like housing benefit will be affected by the change.

More than £1billion is to be trimmed from foreign aid spending to reflect slow economic growth. The Chancellor said Britain would hit the controversial target of spending 0.7 per cent of Britain’s income this year, as promised. But he said the rise in the aid budget would be ‘adjusted to ensure we don’t spend more than 0.7 per cent’.

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BUDGET 2013: Osborne tightens grip on rising cost of state handouts to stop benefits 'spiralling out of control'